How to Plan Your Taxes If You Have More Than One Income Source (Job + Side Business + Rentals) – A GSCCA Expert Guide
Tax planning is more complicated if there’s multiple source of income for an individual like in case you earn a salary from your full-time job and are making side business or freelancing profits as well as earning rental income from property. All such categories of taxes are differently taxed under the Income Tax Act and thus good tax planning is required to prevent mistakes and also avoid penalties and surplus tax outflow. Here at GSCCA we assist people with a variety of income sources to minimise their tax liability and maximise claims through the use of planning, appropriate record keeping and strategically planned deductions. It is that comprehension of how each income head functions and can be managed in totality, which lays the groundwork for efficient tax planning.
Knowing The Tax Treatment Of Various Income Avenues
Incomein India is categorized under five heads, although salaried income, business and house property income are most relevant for earners with multiple streams. Your salary is taxed against the Form 16, provided by your employer, showing fixed and variable components of your salary like basic pay, HRA, and allowances. Business income or freelance receipts are considered profit and gains from business profession, for which books of accounts must be maintained; expenses are eligible to calculate deduction and is subject to tax audit in certain cases. Rental income is house property income which gets taxed on the annual let out value (generally gross rent minus municipal taxes) after providing for standard deductions like 30 percent of net annual value and municipal taxes.
The laws to calculate the other two classifications are distinct. Salaried income is easy and comes as TDS deduction from your employer, but business income needs self-assessment and paying advance tax.
Tax Compliance in Case of Earning from More than One Amusement Company
The reason is that there are now two tax regimes in India — the old regime, with deductions and exemptions available for a number of expenses, and the new one, which comes with lower tax rates but only very limited deductions. For those with salary, business and rental income, the old regime provides multiple tax-saving opportunities since one can claim deductions under HRA, LTA, 80C, 80D and for home loan interest outgo besides set-offs on property losses. The new regime is likely to be helpful only if your deductions are held in check.
The way things work under the old system, salaried employees are eligible for a number of exemptions to calculate taxable salary. Deductible expenses for tax purposes can include rent (on a separate office you have as a business owner), internet bill, depreciation, fuel and business travel. Rent collected also becomes more beneficial when home loan interest comes would into picture, especially on self occupied property under the old regime. The only way to know which regime lowers your tax liability more is to compare the two regimes with real numbers. GSCCA would advise to ensure you review your estimates on an annual basis and more so if patterns in income change.
Tax for Salary + Side Business Income Hope this is right place to ask.
There is a misconception that the TDS deducted by the employer takes care of entire tax liability. Not so when you’re making money from a side business and freelancing or consulting. Business income is taxed independently, and you have to add the same to your total income at the time of filing taxes. As TDS is deducted by an employer only of the salary component, am additional tax on income generated out of business needs to be paid by the individual.
The best solution is to make quarterly advance tax payments. Advance tax is a must if your total income tax liability on all revenue sources would exceed Rs 10,000 in a year. By paying timely advance tax you prevent interest under Sections 234B and 234C. Also, it is important to keep books of accounts for your side business, since deduction cannot be claimed except for expenditure which can be verified on record. Business owners using digital means of payments, invoicing tools and GST-complaint billing find life easy at the time of filing. GSCCA guides clients in setting up business income, determining reimbursable expenses and organizing businesses to avoid deductions discrepancies that may arise.
Managing Rental Income and House Loan Benefits
Rental income has its own tax considerations, though a little planning can reduce overall tax liability by quite a bit. In respect of actual expenses incurred, a concession of net annual value (N.A.V.) may be availed to an extent upto 30% under the law. This will automatically reduce taxable income on rent. If the property that you have rented is on loan, then under the income tax act of India even the interest part of your home loan is an eligible deduction which means it makes rental income more efficient in terms of taxation.
For self-occupied properties, the old regime permits deduction of interest up to two lakh rupees in a year. In case you have multiple self occupied properties, only one property will be eligible to be treated as self-occupied and the other deemed to be let out. Here, notional rent will have to be considered and tax planning is key. The GSCCA advises on the structuring of home loan EMIs; accurate determination of annual value and maximising eligible deductions to ensure that rental income is a proactive financial asset and not a drag in taxes.
Clubbing of all sources of income in the ITR filing
The last tax-planning step is to ensure that all streams of income are accounted for effectively under the appropriate heads. Salary income should be in sync with your Form 16, business income should depict net profit after expenses and rent income has to be backed by rent receipts and municipal tax records. TDS in Both 26AS and AIS have to be reconciled before filing, or it will result in notice / mismatch.
Selecting the right ITR form is as significant. Those with salary income, rental income and business income have to file ITR-3. After aggregating the entire income, final tax is calculated and deductions of different sections are allowed. For many clients, it is not just the return but compliance throughout the year.” GSCCA provides all-embracing tax assistance, by perusing through each and every detail, clearing the documents and disseminate calculative numbers that are even unshakeable under scrutiny.
Why It Makes Sense To Use A Pro When You Have Multiple Incomes
Diverse revenue streams lead to financial independence, and tons of compliance headaches. Good record-keeping, documentation, regular tax estimations and wise deduction planning are key to prevent late fees – but also optimise tax savings. An experienced CA firm such as GSCCA makes sure that your income is properly arranged, you get the maximum benefit of deductions and you file your taxes in compliance with the law. When you work with the one of our tax planning specialists, you can focus on advancing your career or growing your business and investments and not have to reconcile anything financially because of a mistake down the road.